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I also wrote earlier in my blog that India VIX and Nifty movement are inversely proportional. You can read that post here:
What is India VIX?
India VIX is a volatility index based on the NIFTY Index Option prices. From the best bid-ask prices of NIFTY Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days. You can read more here:
So basically not just Intraday, but India VIX can help guess market direction to some extent for positional traders as well.
How India VIX and Nifty are Related
Today (12-Sep-2022), just to explain to you the movement of both I have their screenshot and pasted it below. See how India VIX is decreasing and Nifty is increasing.
This is the screenshot of India VIX on 12-Sep-2022 at around 1 pm when markets were open:
This is the screenshot of NSE on 12-Sep-2022 at around 1.10 pm when markets were open:
How India VIX can help you decide the market direction for intraday trades
If you are an Intraday trader India VIX can help you take a trading decision. Just go against the India VIX trend for the day. You can also go with the trend of the Index – but India VIX trend is more clear than the Index trend. You do not need any technical indicators to see the trend from your naked eyes. Just a glance will help you to guess the trend for the remaining of the day.
Can India VIX be Manipulated?
India VIX is machine-generated, so it cannot be manipulated. Though nowadays it is very hard to manipulate stock movements, if not impossible. But India VIX cannot be manipulated in any way.
Read How Illiquid Stocks are Manipulated
Illiquid (low volume) stocks are manipulated by fraudsters who login into someone’s account by somehow getting their password and short sell, for Intraday only, in huge quantities which creates real (but illegal and fake) volume. This crashes the stock. When the stock falls, they buy that in their account and wait for a reversal. When the stock reverses back to where it was – they sell and book profit. All of this is done in a few seconds. This is called a flash crash.
Can this illegal trade be reversed?
Unfortunately, unless the person in whose account the fraud was done, does not report this to NSE/BSE where the trade took place within 24 hours, it becomes a legal trade. Even if they report, they have to give proof that some fraudster had taken their password and did the fake trading to make sure the stock falls.
But even if NSE/BSE reverses the trade the damage would have already been done. The person who did the freak trade would have withdrawn all cash in his bank account. After this, the only option for the person who got cheated is to file a case in a court of law. Unfortunately, you know that in India it may take decades for a case to finish.
However, luckily nowadays due to strict surveillance by SEBI and market regulators, these things are not very common, but still, you must keep changing your Demat account password every 3-4 months and must not write it down anywhere. Just remember it as you remember your name and make sure not to give your Demat account details to anyone for whatsoever reason.
It is even more challenging to flash crash Index yet it does happen. You can check the dates here:
So trade safe and be safe.
Have you ever been asked about your trading password or any other details? You can write in the comments section below.
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